DCW Ltd (DCW) Q4 FY23 Earnings Concall Transcript

DCW Ltd (NSE:DCW) Q4 FY23 Earnings Concall dated May. 12, 2023.

Corporate Participants:

Saatvik Jain — President

Pradipto Mukherjee — Chief Financial Officer

Amitabh Gupta — Chief Executive Officer

Sudarshan Ganapathy — Chief Operating Officer

Analysts:

Saket Kapoor — Kapoor and Company — Analyst

Anand Mehta — Equirus Securities — Analyst

Sanjeev Kumar Damani — SKD Consulting — Analyst

Nimesh — Visero — Analyst

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Anil Shah — Individual Investor — Analyst

Anil Mehta — Equirus Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY 2023 earnings conference call of DCW Limited hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you and over to you sir. Thank you, Vishal. Good evening, everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of DCW Limited. On behalf of the company, I’d like to thank you all for participating in the company’s earnings call for the fourth-quarter and financial year ended 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s con-call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The focus of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review. Let me now introduce you to the management participating with us on today’s earnings call and hand it over to them for opening remarks. We have with us Mr. Saatvik Jain, President of DCW Limited; Mr. Amitabh Gupta, CEO; Mr. Sudarshan Ganapathy, Chief Operating Officer; and Mr. Pradipto Mukherjee, Chief Financial Officer. Without any delay, I request Mr. Saatvik Jain to start with his opening remarks. Thank you and over to you sir.

Saatvik Jain — President

Thank you, Anuj. Good evening, everyone, and welcome to the fourth-quarter and financial year ending 2023 earnings call of the DCW limited. I’m happy to announce that the DCW has achieved some major milestones this financial year. Most importantly, the company has clocked its highest-ever annual revenue, highest-ever EBITDA and highest-ever net profit. Due to the company’s integrated operations, we have — we have a healthy balance between commodity and specialty chemicals, which creates a natural hedge against volatilities of the commodity cycle and safeguards the sustainability of our margins.

Our absolute EBITDA grew by 32% year-on year in FY ’23 with EBITDA margins improving from around 13% in the last year to north of 16% in FY ’23. Our net corporate has also seen a significant growth by 79% year-on-year. Our consistent improved performance has resulted in treating upgrades in the last 18 months, which now stands at an A, which is another high for the year. This financial year, there has been a structural shift in our finance cost with the reduction to sub 10% from north of 17% with the refinance of our high-cost debt. The benefit of this can be seen from our Q3 and Q4 numbers.

Now coming to the segmental business performance and outlook. As you may know, the Company has taken various strategic measures over the years to integrate its operations and also focus more towards specialty high-margin products, which derisks the Company from volatility in the commodity cycle. This has helped the company post a decent growth overall — in overall revenues in FY ’23, but more importantly, improved our margin profile and ultimately our profitability.

On the specialty chemical segment in Q4 FY ’23, we witnessed a sharp decline of 19% year-on year in the net realizations of C-PVC, while EBITDA margins improved to 39% due to lower PVC prices. C-PVC demand continues to remain strong and growing in double-digits. With more-and-more penetration of C-PVC pipes in lower-tier cities and rural India, we expect the demand to remain strong. For SIOP [Phonetic] revenues and margins are consistently increasing over the quarters with Q4 FY ’23 capacity utilization, increasing to around 80% and EBITDA margins of around 39%. We have emerged as not only the largest Indian player in SIOP, but one of Asia’s largest.

With strong growth outlook for the paint sector due to high-capacity addition, we expect to grow our domestic pipe significantly. Our exports are also growing at a good pace. Currently, we have a strong U.S. presence catering to two of the largest consumers of SIOP. Recently, we participated in the European Coatings Show and are hopeful of expanding our footprint in the European market as well in the near future. For the financial year ending ’23, our Specialty Chemicals segment contributed around 27% to our overall EBITDA.

Moving on to the commodity chemicals segment. Caustic soda prices show a sharp decline of 37% quarter-on-quarter and 14% year-on year and synthetic rutile prices have also declined by 31% quarter-on-quarter. We believe that the prices had almost has mostly bottomed-out and going-forward, we may see some recovery, especially as China’s domestic market and domestic demand improves. The prices of the major cost driver, which is coal have corrected by about 10% to 15% and we feel that further reduction is expected. The demand growth for caustic soda is expected to be around 5% to 5.5% CAGR in the coming years with the alumina sector being the major demand driver. While textile sector is recovering and expect it to normalize. We also expect other sectors like soaps, dyestuff etc., to also normalize going-forward.

In PVC now the demand has recovered fully to pre-COVID levels and the lower PVC prices have resulted in significant demand surge with the end-users. As PVC is infrastructure polymer we expect the demand to be very strong. However, important surge of substandard PVC from China continues to put pressure on PVC prices where prices declined by 24% on year-on-year basis. But now shown margin improvement on a quarter-on-quarter basis. We expect that with China’s domestic demand improving, the export pressure from China should reduce going-forward. We have started FY ’24 with both caustic soda and PVC realizations being on the lower end of the spectrum unlike FY ’23 where we started on a high.

Lastly, coming to soda ash. Demand-supply situation was by and large balanced, which led to an overall improvement of our EBITDA margin in Q4 FY ’23 and year-on-year basis. Going-forward, the outlook continues to remain positive, due to improvements in economic activity and demand increases across all its application. As mentioned at our last interaction, we continue to invest in specialty chemicals that will further strengthen our portfolio. Our two projects which had been announced, the additional 10,000 tons of C-PVC and line balancing capex on SIOP are underway. The progress is being monitored closely and efforts are on to fast track the completion. We are hoping for a completion sometime in-quarter two of this year with capacities ramping-up from Q3 onwards. This earlier than anticipated completion will help us move on to our next phase of growth sooner than later. We shall continue our focus on enhancing operational excellence, executing expansion projects and implementing growth initiatives focused on digitalization, sustainable transformation and value-creation for our stakeholders.

With that, I now request our CFO, Mr. Pradipto Mukherjee to brief you on our financial performance. Over to you, Pradipto.

Pradipto Mukherjee — Chief Financial Officer

Thank you, Saatvik. Good evening, everyone. I’d just like to take you through the financial performance of the company. We started the quarter-four numbers. The revenue for quarter-four for the company stood at INR588 crores more or less flat in-line with quarter three, which clocked at INR579 crores. This quarter we saw a significant price correction in caustic soda and our SR. Despite that, the company was able to beat its quarter three topline and that was predominantly because of higher-volume strong across the segments. Caustic and SR typically wasn’t really high as well our soda ash business. PVC also saw increased volume and the good part was that the prices correction which was continuing till quarter three had bottomed-out and we saw some elevation in the prices.

Going to the EBITDA the — going to the EBITDA of the company quarter-four EBITDA from operations came at INR104 crores which again is being flat — more or less flat in-line with quarter three numbers. The margin was maintained at 18%. While are the caustic division, there was a significant reduction in EBITDA because of the price corrections as earlier mentioned. However, the PVC business for the first time in this fiscal showed a profit of around INR23 crores predominantly because of volume increase and price stabilization and also the — the strategic procurement in which was taken in-quarter three for our [Technical Issues] purchases which was earlier mentioned in the Q3 earnings call.

Soda ash remained consistent. The performance of soda ash remained consistent across the quarters. And more or less we could clock the same EBITDA as we have done for last quarter. Now if we do this analysis on a year-on-year basis compared to last year, our revenues were down by INR119 crores, which is roughly a 20% down from INR707 crores. While the volumes across the segments, more or less remain the same. This was predominantly due to the PVC prices is down by 34% and caustic soda prices down by 14%. It’s important to mention here that the PVC and caustic are unusual revenue drivers and a baseball [Phonetic] in these two segments have orders in the topline.

In the performance so far as the EBITDA is concerned, we had shown an improved EBITDA of INR104 crores because of INR100 crores what we did last year quarter-four. But that’s predominantly because of the soda ash division for quarter-four this year doing much better than last year, both in terms of volume and efficiency. SIOP division continuously since growth in terms of volumes of production and sales. And — and that were the main contributors on a year-on-year basis to help [Technical Issues], the bottom-right.

However, the PVC prices has fallen from last year to this year was a drag on a comparative basis on the EBITDA. The margin for quarter-four as I told, this year was at 18% and compared to last year the margin was around 14%. Interest cost as Saatvik has already mentioned, post the refinancing done in September ’22 quarter three demonstrated a sharp decrease in finance costs which got further reduced in-quarter four.

I’ll briefly touch upon the annual numbers. The annual revenues for the company stood at INR2,625 crores, the highest-ever, which was a 7% increase over last year. The EBITDA from operations stood at INR434 crores again highest-ever, which was a 34% increase over the last fiscal which [Indecipherable]. For the year as a whole, caustic soda ash and SIOP divisions were the major divisions driving our EBITDA on the bottom-line, while PVC was — was the reverse turnaround because of pricing pressures, which we witnessed.

For the entity level margin got expanded from 13% to 17% for the year, as a whole. The PAT had shown an increase of 79% compared to last year. Now if I run-through the balance sheet a bit, the current ratios of significantly improved to 1.3, from 1.02, which we closed last year in March with a comfortable cash balance in the balance sheet. We’ve also been able to consider deleverage our balance sheet. The debt-to-equity ratio has come down, below 0.5, which was around 0.7 end of last fiscal. The net-debt to EBITDA has reduced to 0.76 from 1.23, which — which was there last year. The ROCE also saw an expansion and ROCE for the year FY ’23 stood at 22%, [Technical Issues] 17% last year. Additionally, as Saatvik mentioned to reiterate the cost of borrowings have come down sub 10% from H2 onwards, from our previous cost of 17%.

With this I would — I would request all the members to ask any questions or clarifications there. Thank you.

Questions and Answers:

Pradipto Mukherjee — Chief Financial Officer

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. The first question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yeah, [Foreign Speech] and thank you for this opportunity. Sir, firstly if you could give an update on this increasing capital work-in progress, so you did mention about the increase in capacity. In fact, doubling of capacity for C-PVC and debottlenecking for SIOP. So how much have we spent, as on 31st March and what is the INR59 crores [Technical Issues] Thanks.

Pradipto Mukherjee — Chief Financial Officer

So, hi, this is Pradipto. So, we mentioned — when we mentioned our capex for both C-PVC and SIOP we indicated a number of INR125 crores. If you see our balance sheet, we would have spent around INR60 crores as on 31st of March. And I mean that — that detailed thaat 70% of the work is done and we anticipate there could be some savings in what we had guided at the beginning when we started the project.

Saket Kapoor — Kapoor and Company — Analyst

And the implementation within these [Indecipherable] sir?

Pradipto Mukherjee — Chief Financial Officer

So as per announced and the communication, which we sent out to earlier, the volumes were expected to come from H2 onwards. We have been sick — we have been monitoring the progress as Saatvik has also told and we anticipate the volumes for C-PVC to start dropping, some of that from quarter two itself, which is an improved guideline to our initial assessment. And so far as SIOP is concerned, while production, since it’s a debottlenecking capex productions, if you will see gradually ramping-up in-quarter one also. But the full benefit of SIOP, we anticipate to be witnessed in from quarter three onwards.

Saket Kapoor — Kapoor and Company — Analyst

Just one more question on SIOP and [Technical Issues] come to cost. So sir, taken it into account the improved performance for [Indecipherable] for the March quarter, how should we think the picture going there. Should these line items, should be linear in terms of the topline and bottom-line or they are also subject to be the use of the market just like our competitors, sir?

Pradipto Mukherjee — Chief Financial Officer

So, if you compare, when we got into FY ’23, early 23, the prices of commodities, typically on the rise. When we are getting in this year for FY ’24, the prices of commodities have come down. We expect the prices to bottom out here and — and the additional volumes in terms of our C-PVC and SIOP to come from quarter two and quarter three, respectively.

Saket Kapoor — Kapoor and Company — Analyst

No, sir. I was just trying to get some sense on the bottom-line impact in terms of these two segments, the profits this year posted for SIOP and C-PVC for quarter-four. What is the nature of these profits? Are these profits one can look at it on an annualized level also depending upon our order bookings?

Pradipto Mukherjee — Chief Financial Officer

[Indecipherable] for SIOP and C-PVC, our margins has been north of 35% and we expect that the margins to be maintained at that level, even on the increase [Indecipherable].

Saket Kapoor — Kapoor and Company — Analyst

Now coming to the caustic and soda ash particles, as very likely mentioned it was soda ash, and I think this division in the contract basis that resulted in the second half, very good set of numbers for the soda-ash segment. Could you give us some more outlook, I think the soda ash major did went for a price revision downwards in the month of April, and also looking at what the alerts from the Inner Mongolia capacity coming up, what should — what can you share on in terms of this that pricing going there?

Pradipto Mukherjee — Chief Financial Officer

So, I cannot give this update, I’ll request Mr. Amitabh Gupta our CEO to give you more detail on this.

Amitabh Gupta — Chief Executive Officer

Good afternoon, everybody. Amitabh Gupta here. So, this is a question about soda ash. You see, India is a net importer of soda ash. We produce to meet our production fall short by almost one million ton, and about 70 lakh tonnes of soda ash is imported every year in the country. Now, you’re packing this thing was production is starting in Inner Mongolia, well that product will find very difficult to get into the Indian market because of the logistics, number-one. And the markets are a bit subdued because of the China only being not in a good shape, which has started picking-up. Now, when you were talking about the right connection during the April basically, it was the costing. The cost of soda ash and various raw-materials their costs have gone down. And that was the reason in the international market which is instrumental in bringing down these prices. But I don’t think it has affected our margins so far. Okay.

Pradipto Mukherjee — Chief Financial Officer

So just to summarize, the demand is intact and it is on the impact of the lower RM specific coal prices that is the reason for the division. Okay.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Okay, sir. And for the caustic sir…

Operator

I am sorry, Mr. Kapoor I would request you to please [Speech Overlap].

Saket Kapoor — Kapoor and Company — Analyst

Okay, mam, if you could — if you could just give some more color on caustic soda and then I will come in the queue.

Pradipto Mukherjee — Chief Financial Officer

You see caustic soda again today, we are going through very funny situation where both caustic soda and chlorine they are down. Now, caustic soda, basically what has happened, I think about five-six months back there was a huge exploit in demand from Europe and we still did extra banking in Europe, thinking that the energy cost will remain very-very high. Maybe the local produce will not be there and the result is they are now over-stocked. So, there is no buying coming from Europe at all and I don’t think it will be there for the next month or two or maybe three months. The cost of caustic soda, is again coming down because the major driver is gold prices where basically the energy cost. So of course the margins are absolutely [Technical Issues] today. But the prices, which we saw in the third quarter were not realistic prices if you ask. These are the panic buying from the European countries which, created these sort of prices. So frankly, we cannot compare the prices with the prices at that time, okay.

Saket Kapoor — Kapoor and Company — Analyst

Thank you, sir. I will join the queue.

Pradipto Mukherjee — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Anand Mehta from Equirus Securities. Please go ahead.

Anand Mehta — Equirus Securities — Analyst

Thank you, sir for the opportunities. Sir, I have just two-questions. What was kind of demand in the quarter for the C-PVC and post March orders and demand for the C-PVC?

And the second question is, going-forward, how do you see the realization trajectory for the C-PVC?

Saatvik Jain — President

Sudarshan, maybe you can take this?

Sudarshan Ganapathy — Chief Operating Officer

Yeah, yeah. Thank you. I will take this question. C-PVC demand is growing at over 12% to 13% on an year-on-year basis. And FY ’23 the demand in our estimate was close to 200,000 tonnes. And it is expected to grow to maybe 220,000 to 230,000 tonnes in the coming years. So, we don’t foresee any issues in placing these additional capacity coming because with the domestic production, as we talk is not more than 30,000 to 40,000 tonnes and rest are all only met by imports. So that will take — take care of the question of the demand.

Now coming on the price utilization, the major raw material is PVC resin. So, whatever correction we have seen on the C-PVC is purely on account of the correction in the PVC prices. And going-forward even though C-PVC is a specialty, you cannot have an unrealistic delta between PVC and the C-PVC prices. So, C-PVC prices, they are based on the PVC price but not on a month-on-month basis. There will be some correction happening on a maybe on a quarterly basis. So, if you see in the FY ’22 when PVC prices went up $1,500. C-PVC prices did not go beyond $2,000 or $2,100. So now that the prices of PVC have come to sub $900 the C-PVC devices are in the range of $1,800, so when the PVC prices fall, it helps us to improve our bottom-line. So, we hope that PVC prices are going to be at this current level, stable, help us in maintaining our bottom-line possibilities.

Anand Mehta — Equirus Securities — Analyst

Okay. Sir, just one question. I just forgot the number, what would be the capacity of C-PVC total in India, domestic capacity.

Sudarshan Ganapathy — Chief Operating Officer

Total in India, based on the announced capacity as of date, we are at 10, which will go to 20 in the short span and [Technical Issues] has got announced capacity of 30,000 tons. So totally, 40,000 to 50,000 tons is the domestic capacity.

Anand Mehta — Equirus Securities — Analyst

Okay, sir. Thank you.

Operator

Thank you. The next question is from the line of Sanjeev Kumar Damani from SKD Consulting. Please go ahead. Sir, and congratulations on very fine set of numbers announced by you. The entire team at B2W deserves lot of congratulations and respect for this kind of operation. So, am I audible? Shall I begin sir?

Sanjeev Kumar Damani — SKD Consulting — Analyst

Yes please. Sir ji now I want to know what measures we are taking for reducing our energy consumption in all the sectors of our production facilities, one. And secondly, how do we plan to reduce the cost of energy by, setting up some solar plant or something like that? So, this is the first question I want to know from you sir. Energy savings, and the recent cost of energy? What measures taken in the last year and what more we are taking sir.

Saatvik Jain — President

Right. So firstly, thank you for your kind words. As far as the energy costs, energy consumption goes, there have been certain maintenance, which have been undertaken at the plants, primarily in caustic soda division, which has overall reduce our consumption over there. And as already reduced cost per ton of power for caustic soda. Going forward, what we are looking at in terms of overall reducing the price for energy, we — I think we have mentioned during our last call as well we are evaluating certain options of renewable energy for our Sahupuram complex, both from the ESG perspective as we are trying to reduce our carbon footprint and want to reduce our coal consumption and also with indirectly help for significant saving in power cost. So that is a project which is being evaluated and hopefully soon, as we conclude it, we will communicate the details of the same.

Sanjeev Kumar Damani — SKD Consulting — Analyst

I also remember that last-time you were saying that you are planning to do some solar energy installation. So, but no…

Saatvik Jain — President

It’s not — not concluded as of — it is not concluded yet.

Sanjeev Kumar Damani — SKD Consulting — Analyst

My second question is regarding the net-debt as on 31st March in the books including working capital if I can get one figure from that.

Saatvik Jain — President

Yes, Pradipto you can take that.

Pradipto Mukherjee — Chief Financial Officer

So, the large debt of the company stands at INR504 crores. And we have cash balances of around INR160 crores. So, it would be INR340 crores of debt net of cash, when we say INR504 it is term lending. We also have around INR300 crores-odd in working capital lending in farm of LC non-fund based, these are more balance sheet item, and which are — which are demonstrated in our [Technical Issues].

Sanjeev Kumar Damani — SKD Consulting — Analyst

And now the second question is that out of this INR160 crores in cash, how much will be spent during this year as capital expenditure and how much we intend to repay?

Pradipto Mukherjee — Chief Financial Officer

So, we don’t intend to repay any amounts. So let me give you certain numbers. So, typically our debt for the company from last year to this year has come down by INR50 odd crores, so INR550 crores to INR500 crores. Our natural repayment plan is INR124 crores for this fiscal. Also, and our EBITDA is around INR440 crores. So if we manage to repeat our performance of this year as a bare minimum in terms, then our debt-to-EBITDA goes down, even the gross debt-EBITDA goes down below one. Secondly is that today, previously, I understand, when the questions were coming on the debts and for us as the management also, we were worried because the cost of borrowings. So the cost of the funds were as earlier 17%, but today if you see by the end of this year, the cost of debt has gone down to sub 10%.

My returns on capital employed is 22%, so basically on the INR500 crores, the 13% of solid spread is going to the equity shareholders right and reap the cash-in the balance sheet, we are trying to that’s a chest, which has been maintained. We are trying to ensure you know fast-tracking of our project, which is undertaken now. And somewhere, once we complete these two projects, the strategy team is working on the next project. For growth driver for FY ’25, we will take a decision as to whether we repay the data at that point in time, depending upon the total capex requirement or refunds. The mixed effects as well from our internal accruals.

Sanjeev Kumar Damani — SKD Consulting — Analyst

My only last question is regarding the total capex, as already planned today. This will be spent during this year, one amount I wanted to know that. How much…

Pradipto Mukherjee — Chief Financial Officer

So, the announced capex, I can give you the number on the announced capex — announced capex was around INR125 crores. So, let’s assume we anticipate there would be some savings under capital cost, what we anticipated. But having said that, we reached INR125 as well, we have to do a balance capex of around INR60 odd crores, to complete the announced capex. Normally you have INR30 to INR40 crores of routine capex. So for the announced capex or the routine capex roughly we should be spending around INR100 crores.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Okay sir, one fine thing sir that, is it possible for you to do production and hold quantity physically every month-on BSE either on, by seventh or sixth, if you can…

Pradipto Mukherjee — Chief Financial Officer

I think that’s not a mandate. So, we made a lot of volume…

Sanjeev Kumar Damani — SKD Consulting — Analyst

No, no, no, that will give us an insight sir, on the [Technical Issues].

Pradipto Mukherjee — Chief Financial Officer

We can give such insights based on specific request from the investors, but I’m not really sure about that…

Sanjeev Kumar Damani — SKD Consulting — Analyst

I am saying straight away do it, kindly consider this, because that will give lot of insight to all the investing community about the company that how the progress is are being made. I meant companies are announcing it might reduce the price of that product, they give announcement on that, we have reduced the prices or will get impacted, so if…

Pradipto Mukherjee — Chief Financial Officer

If so we will find a mechanism sir to [Speech Overlap]…

Sanjeev Kumar Damani — SKD Consulting — Analyst

It is a request from me. If that is suitable from all angles that it can be brought up and thank you very much. All the very best, sir. Salutation for all the good work that you all — that all of you are doing, sir. Thank you.

Pradipto Mukherjee — Chief Financial Officer

Thank you for your kind words.

Sanjeev Kumar Damani — SKD Consulting — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Nimesh from Visero [Phonetic]. Please go ahead.

Nimesh — Visero — Analyst

Yeah, is my voice audible.

Operator

Yes, please proceed.

Nimesh — Visero — Analyst

Yeah. I just got three questions and management of [Technical Issues] any other if you wish to. The first micro question is that, what are the current PVC VCM spreads the company is pricing at this point of time. And what were the height. I mean, management in guidance for the two years lows and highs of recent parent current spreads the company at this point of time? Second question would be on the C-PVC and as we understand that our competitor has also put up capacities are we seeing any headwinds on that front or are we — are there anymore stronger ground that our product — product is far more superior then our competitor and we may actually put some higher realizations than what the competitors, I think at this point of time. And the third will be a bit of a medium-term question. Historically we have been guiding that we want to move towards fifty-fifty profile of specialty and commodity chemicals. We are already clocking INR440 crores of EBITA another 10,000 tons of C-PVC will add another $20 million, that’s around close to INR50 odd crores of EBITDA in coming year. And so, that would push us to final levels of EBITDA. Are we seeing that growth manageable, you mean any kind of number, we can use for a modeling purpose wherein FY ’24 kind of in a bigger number we are working with? That’s it from my side. Thanks.

Saatvik Jain — President

Sudarshan, you can take on this.

Sudarshan Ganapathy — Chief Operating Officer

Yeah, for your first question on the GCM PVC spreads, I don’t know whether you covered our earlier calls, if you see FY ’21 and FY ’22 predominantly the spread was historically at higher number, purely based on the import parity pricing, because the PVC prices — international prices surge, because of the multi-fold increase in the logistics cost. The freight normal freight, which was at $30 to $40 went up to $400, which resulted in a higher net-debt, cost of PVC and since our raw materials are all on a time-charter basis on a bulk ship — shipment basis we were less impacted on the freight. So, most of the last two years before the preceding financial year VCM, PVC spread loss consistently about $300 which is again an artificially higher spread, not sustainable.

So, as we move towards the last financial year, the prices started correcting, because two things happened, one is the logistic — the container freight rates got started getting moderated and there has been an increase in ability of PVC from China and other countries. So this started correction in the PVC price. And as a result the DCM PVC spreads started coming down. And as explained in our earlier calls that it was an inventory lag of minus one because we usually get the VCM on at previous months price and the PVC was — corrected PVC prices because they were falling in accelerated mode. So, we were consistently hitting a lower price which very times even lower than $120 or $130 because of the one month lag. Then in the month of November when the price — there was no sign of any prices getting corrected, we took a strategic call to take a pause on the retail sourcing and that helped us to some extent, lowering the DCM PVC delta. As a result, in the quarter-four, we could post a INR24 crores of profit in the PVC business.

I think that as we talk now the VCM, PVC spread is in the range of $175 and $180. I think this this, this would be the ideal price going-forward. I we don’t expect the spread to remain large. So I think at $180 spread if you add the duties at both ends we are close to INR225 and $230 as the overall gross spread between the raw-material and finished product. I think that is what we normally take in our budgeting for the PVC profitability.

Then coming to the next point on C-PVC, I believe everybody has got their own pluses and minuses and we just cannot comment on the quality, or anything about our competitors. As far as we are concerned, we have a first-mover advantage and we have the products that are well-established with all our anchor customers. And we hope that going-forward, even we will not have any issues in ramping-up our production from a single plant and getting the product approved by our customers.

I think the to the third point, I think I will ask Mr. Pradipto to give answers. Thank you.

Pradipto Mukherjee — Chief Financial Officer

Yes sir, could you please repeat the third question for me please. Hello?

Operator

I’m sorry sir, the participant has left the queue. We will move on to the next question.

Pradipto Mukherjee — Chief Financial Officer

I think the question was more on what would be, you know — C-PVC profits added up to the next year. So first of all, our C-PVC profits from an additional 10,000 tons, I would roughly give our numbers, which correctly you mentioned was around INR50 crores. But for the year FY ’24 seem to be cut. I mean we seems to be availing three quarters at best of our production and sales, the number would be lower. On an annualized level from next year onwards, we obviously see that spread. Now, whatever numbers we have achieved this year or combinations of factors of price — average prices for the whole year across our prices.

Operator

Ladies and gentlemen, the line for the management has been disconnected. I would request you to stay connected while we try to reconnect the management’s line. Thank you.

Ladies and gentlemen, thank you for patiently holding the line for the management has been reconnected. Over to you sir.

Pradipto Mukherjee — Chief Financial Officer

So, as I was saying that if the average prices what we’ve achieved this year, are repeated next year we would have the profit also repeated and therefore the additional capacities and the profits that from part of [Technical Issues]. Having — having said that, we’ve begun almost maxed out the capacity this year for all our existing products. Our objective internally is to leave our capacities entirely sweat it out and get other capacities — additional capacities on-board as fast as possible. Prices and profits will be the function of the markets and the demand supply.

Operator

Thank you, thank you sir. The next question is from the line of Lalit Wadhwa from Prospering Advisors LLP. Please go ahead.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Good afternoon, sir and wonderful produced by the company. I’m happy. Sir, I wanted to know about this inventory turnover cycle. So, inventory days have gone up from 63 days to 97 days as compared to the previous year. So — and so is the value of the inventory, I can see in the current debtors from INR247 crores to INR345 crores. So what is the reason of increase — this increasing this inventory values? Are we not able withstand?

Saatvik Jain — President

No. So typically, as I told, we have maxed out our capacity, whatever capacities are available with us more or less across segments we are utilizing the capacity. There has been certain persistency when we came into FY ’22 as you compare our numbers inventory numbers this year versus last year, it should be it will not be a fair comparison because historically we have been keeping inventories for salt and inventories for our limestones and mined — mined supplies at a higher-level. Since we got into our financial ground somewhere in FY 2021 and we were gradually cut down. So, these are keeping inventories and now we have come back to the inventory levels which we were maintaining for our commodity business somewhere three-four years back and that’s more or less comfortable for us. It will not increase, most likely from here on, but again there are seasonal factors, where you see March-April-May our inventories goes up, because this is followed by rainy season where the mining activities get stopped. So, we prefer to built-up inventories pre-monsoon.

Pradipto Mukherjee — Chief Financial Officer

Sir, this inventory — so what is the proportion of finished goods and raw materials? I think you dropped this question; we will get back to you. I think there would be a good amount of inventory also, in [Indecipherable] but predominantly the increase in inventory, what you’ve seen is from our mind at raw materials as I explained, where we are comfortable maintaining a higher inventory pre-monsoon.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Okay, so the major increase would have been in the raw-material inventories?

Pradipto Mukherjee — Chief Financial Officer

Yes, the soda ash, PVC, C-PVC, we don’t have inventories. SIOP inventories have gone up a bit, because of the production is catching-up and the sales of those inventories following the land. So, there will be some amount of inventory predominantly including the raw-material inventories, which would have gone up.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

And last one, sir. We heard the news, the Tata Chemicals said they will reduce the Soda ash prices by 3.5%. So now in-line with competitive strategy, you will also have to fall in-line. So do you think you’ll be able to maintain the similar margin?

Pradipto Mukherjee — Chief Financial Officer

I think, yes, because as Mr. Amitabh Gupta as also we mentioned there is prices of coal which are coming down. There is prices of coke, which is one of our raw materials, which is coming down. Ammonia is coming down. So eventually if we sell our produce and sell our produce to the market at the prices which has indicated and followed in the market. I think the margin would remain [Indecipherable]. However, there would be some lag effect. That we have to see it going-forward in a quarter, but annually, we don’t see that EBITDA would go down.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Okay, and how about the expansion [Technical Issues]?

Pradipto Mukherjee — Chief Financial Officer

I think are C-PVC, as I told, we initially announced that capacities will be available-for-sale and we will see the sales are starting H2, that gets postponed by a quarter mostly. SIOP, we see that the increased volumes to come up as we initially mentioned from H2 onwards.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

No, my question was are we thinking to further increase our capacity, putting up more factories or…

Saatvik Jain — President

As of now, we have not done with our existing factories. We have some amount of land-bank with us and we — we have certain related chemistries and thoughts in terms of our mix growth into our existing facilities. There would be — there will be some amount of capex which is required for making chlorine neutral as output facility. In that line, the next capex mostly would come in. But thereafter we need to think of some geography B2C.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Okay and how about the dividend payouts. We have a very small percentage, which we pay a dividend.

Pradipto Mukherjee — Chief Financial Officer

So, I think last year we started paying dividends after a quite a number of yards at 20%, and for this year, we pay the interim dividend of 10% and there are proposals for proposals to the [Technical Issues] for an additional 15%, if you calculate that percentage as a percent of our net profits, last year, we distributed 10% of our net profits as dividend and we’d like to do so this year as well.

Lalit Wadhwa — Prospering Advisors LLP — Analyst

Okay sir, thank you so much.

Operator

Thank you. We have the next question from the line of Anil Shah, an Individual Investor. Please go ahead.

Anil Shah — Individual Investor — Analyst

Yeah, hi, I am audible?

Saatvik Jain — President

Yes please.

Anil Shah — Individual Investor — Analyst

Yeah, congratulations to all for the wonderful set of results for the quarter, as well as for the year. Most of my questions have been answered. My only — my only question here is, do we expect any further reduction in earnings from a quarterly basis, which still continue to be closer to about INR20 crores a quarter. I do understand we have a gross term-loan debt of about INR500 crores and working capital about INR300 crores. But I’m just kind of wondering if part of it we get repaid this year, about INR125 crores. So where do you see that basically settling down. And if you — if we calculate.

That’s the first question on the interest part, the second question is if I look at PBIT is we’ve done about INR77 to INR78 crores of the PBIT coming in from SIOP and C-PVC this year. Assuming the expansion for both [Technical Issues], part of this year and assuming 35% plus margins, we should be able to get about INR100 crores of PBIT from these Specialty Chemicals this year. Please do correct me if I’m wrong, but on the other hand, we normally have a cycle wherein we want between PVC and caustic, one of them kind of contribute reasonably well and soda ash is consistent for us. So do you see us despite the expansion being able to meet this year’s EBITDA number of about INR100 crores plus?

Saatvik Jain — President

So, the strategic [Technical Issues] asked many questions in this too that has [Technical Issues]. First of all is the interest cost, as I explained. Interest cost has come down to INR19.5 crores I think if I’m not wrong, in quarter three, and in quarter four, it has come to INR19 crores. Next year, as the overall number, I think the number, but the interest cost will be sub INR70 crores, which would be INR55 crores to INR60 crore reduction from this year then annual numbers, okay. We really don’t see any — and the treasury management would have 4% to 5% of the topline, maintain that cash and we are little about 5% and there is we project which is under and — and we continue our endeavor of next year’s growth as well to announce some capex once we are done with these two.

Having said that, it’s it’s — for us it’s — it’s a good place to be in carrying some amount of cash from the balance sheet. Now just to add-on we get earnings of the cash of around 7.75% to 8% and our overall interest cost as a percentage, the term-loan is around 9.5% to be precise. We are having our negative carry of 1.25% for the cash we have in the balance sheet that’s around INR1 crore in the annual profit numbers. That is significant and we don’t find any reason to repay the debt, let it go by its natural course. Because our repayment is also INR125 crores, correct. Here from now, if we don’t borrow the interest cost will go down by INR125 crores, okay.

Now, coming to your next question. The profits and at the EBITDA level, we did not check the PBT — PBIT level, to be honest. For SIOP and C-PVC, put together this year, we did an EBITDA of INR115 crores, last year we did INR80 crores. And next year at an annualized level — at an annualized we think we’ve a number should be north of INR220 crores. That’s an annualized level. We will get the part benefit of that in this year as we commissioned and start selling our products.

Anil Shah — Individual Investor — Analyst

Okay and between the between the three commodity chemicals, given the outlook that you’ve talked about, do you see on an aggregate of the three of them being able to contribute, because in this year PVC was pretty weak except in the last quarter, where we got kind of some kind of EBITDA-positive, but [Technical Issues] was like Q1 just [Technical Issues]. Given that we are starting off on most of all the three commodities. You see, you know, the three of them being able to contribute, closer to INR250 crores-odd of EBITDA?

Saatvik Jain — President

[Technical Issues] So, typically what happens is that that’s roughly with our 20% to 22% EBITDA margin business for us. Roughly it is around INR330 crores. Thankfully, the prices have been stable. Now, there is a price correction of 2% and we did have a follow up cost-reduction as well and the annualized number needs to be seen, because there is a lag effect of the price corrections for inputs. For the annualized level we — we are pretty confident to repeat that margin of 22%, okay.

Now, coming to your question on PVC. PVC and C-PVC, PVC and caustic, historically has been our natural edge for the company. That’s what our experience says. Okay, so of that we have I mean, obviously our rather relatively stable. So, if you add these two are being a part of fix, PVC and caustic division, put together, we see that the price is more or less bottomed down. For caustic also it is bottomed down and PVC also it’s bottomed down. And the prices me we go up a little bit, but we don’t see the prices coming back to what we are achieving in-quarter two or quarter three capacities. These are for PVC for last year. What happens is that we get reduction in the power cost as the pool prices that [Technical Issues], and that’s more or less that’s already started and we think it will further fall. So more or less we expect across these segments the margins are more or less to be maintained, barring a quarter or two here or there, depending on daily pricing.

Anil Shah — Individual Investor — Analyst

So, when you say money maintained should I take the fourth-quarter for PVC and caustic as the as the base margins?

Pradipto Mukherjee — Chief Financial Officer

So basically, what I’m saying is, it’s very difficult to give you a guidance on the margin for the commodities this year because first of all, quarter-four has been an aspiration as I told, for PVC also, because we did a strategic move-in [Indecipherable] purchase in-quarter three. We also announced upfront that there will be some benefits coming in the PVC profits next quarter. We can’t really quantify. So what we see is basically PVC would give us 5% to 7% kind of a margin in our steady-state. On our caustics, 3% to 4% or a steady a should give good considerable amount of profit [Indecipherable]. So — so it would be very difficult for us to put a number. I mean even if the quarter prices also remain the additional volumes coming from C-PVC and SIOP in the later part of the year, we’ll take care of the price corrections — continued price corrections and stabilization of PVC and caustic prices and this level.

Having said that, when we started last year, we gave a guidance that our EBITDA would be front ended. And as you understand our bodies are coming up in there second part of the year, this year, the profit would be more back-ended. Not really because of the additional volumes coming in the second-half of the year. But we don’t see any dip in our EBITDA, but we — we wish that we reach that, with this year’s number and the vision or this year’s number gets topped up by the additional volumes, but with the current prices that we don’t anticipate that that value.

Anil Shah — Individual Investor — Analyst

So, the complementary to [Speech Overlap] there’s no question, ma’am. I will complement to the management, I just think, even if you could maintain the at an aggregate level, but obviously the contribution from SIOP and C-PVC will increase because of the volumes. I think be a damn good job done honestly because had then [Technical Issues]

Pradipto Mukherjee — Chief Financial Officer

Just a short answer to your question is, if there is price corrections happening, we have the advantage of the additional earnings coming in at worse we will — the price corrections will be taken care by the additional volumes.

Anil Shah — Individual Investor — Analyst

Got that sir. Thank you. Best of luck for the upcoming year. Thank you so much.

Operator

Thank you. We have the next question from the line of which is a follow-up question. This is from the line of Anil Mehta from Equirus Securities. Please go-ahead.

Anil Mehta — Equirus Securities — Analyst

Sir, I just have one question. As of now, what would be the [Technical Issues] of C-PVC.

Pradipto Mukherjee — Chief Financial Officer

Around INR145,000 to INR150,000 per ton.

Anil Mehta — Equirus Securities — Analyst

Okay, so INR45 per Kg, is it so?

Saatvik Jain — President

Yeah.

Anil Mehta — Equirus Securities — Analyst

And what would be the C-PVC price for the import, import C-PVC price?

Saatvik Jain — President

So, basically see have anti-dumping duty in place. However, there are certain [Technical Issues] mentioned, which we feel is happening to amount of imports, which are coming in. So, and that’s why the prices are bit lower than what the anti-dumping prices are fixed, but then the prices — our pricing would be also and [Technical Issues].

Yes please. Hello?

Operator

Hello. Sir, am I audible?

Saatvik Jain — President

Yes.

Operator

Okay, so we do not have anybody else in the queue now.

Saatvik Jain — President

Okay.

Operator

Do you want me to make more announcements for more questions.

Saatvik Jain — President

No. I think we can close the call if there is no one else in there, it is good, you please check once.

Operator

Sir, we have Saket Kapoor, again in the queue. Can we take that question.

Saatvik Jain — President

Yeah, you can take, no problem.

Operator

We have the next follow-up question from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Yeah, thank you for the opportunity again. I just missed an interim part of the conversation. So, if we take — summarize this last year it was the contribution from the caustic and the late contribution from soda ash that, that compensated for the PVC segment comments. So going ahead, as we are seeing that be contributing for this year would be somewhat slumber [Phonetic] from what caustic soda contribution is depending upon despite current prices and also the scenario that is shaping up. How confident is the management that we would be able to at least match the current year’s performance because that looks like going ahead, if the performance from the caustic or the PVC also flattening going there. So how much was the increase in the contribution from the PVC and SIOP would reach to the gap, that would be that might be created from these lower performance from the commodity chemicals?

And also from the soda ash, part also sir, you did mention that it is about only be the benefit of the lower raw-material price it and — and the margins will be maintained. This is what you alluded to?

Saatvik Jain — President

Yeah, for soda-ash, we will take it one-by-one, for soda ash we think that the margins would be north of 20% maintained for us. Given our understanding that if the prices fall and we believe the coal prices are falling and coke prices are falling, we think that we will be able to maintain the spread, what we have achieved this year.

Coming to C-PVC and SIOP categorically told you that annualized profit post our capacity is coming on-board, would typically be north of INR200 crores. Now coming to a PVC and C-PVC, we really don’t have an answer for your question sir. But I can just tell you that if you don’t repeat our performances, then there will be many other companies who would be even further sulking [Phonetic]. We don’t expect the prices to be at this level static for the entire year. And we also don’t expect the even after the first reduction of the coal prices, that the prices of coal and our basic raw materials will also remain at this level. So, what happens is in the commodities. If we are a in a player into B2B and we also purchased from our suppliers, who are who are into the similar segment what typically would happen is, if the commodity prices continue to go on falling more input costs will continue to go on falling, but unfortunately, there will be a lag effect of which we have to deal with.

Saket Kapoor — Kapoor and Company — Analyst

So just to small point, sir, if you take only the coal price component, if you take the average of the coal prices for the last financial year and the current prices, could you quantify the difference in the cost?

Saatvik Jain — President

We have, we did not want it Saket because we just started this year, we are still closing out-of-the last year, to be honest, but eventually on a hunch for the April numbers, what we see — we see that the coal prices have come down in India, contracting for coal. We are seeing the coal prices even lower. So — so we think that our margins will be maintained even at these prices, but if it goes on falling, the way it happened for PVC, it may happen for other business also, but historically we have not seen both private sector, over the last 10 to 12 years, we have never seen both the PVC prices and the caustic prices, both falling at tandem. That has never happened in the period of last 12 years.

Saket Kapoor — Kapoor and Company — Analyst

Yes, that is correct. But if you have the number for the last year coal procurement prices, sir. The average.

Saatvik Jain — President

I don’t have that readily available with us. The power cost roughly would be 33% of our total you know. I mean 33% of the total company’s first to top-line. So-so obviously, that’s a big chunk of our cost. The coal prices come down, so we will have a significant benefit. Apart from that, as because we are — we are actually looking at the opportunity of alternate source of energy though primarily not from pricing aspect, it’s more from an ESG aspect, that obviously all for additional follow savings on the power cost.

Saket Kapoor — Kapoor and Company — Analyst

Right sir. Thank you, sir. And on the contingent liability front for many years, I think you have been at number four is being there I think the Tamilnadu electricity side and also about the customs part. So, anything on the resolution. There were some — something come offer [Technical Issues] from the government earlier on, like the [Indecipherable] schemes. So we didn’t find these also fruitful and what the ultimate apart from these two-line items getting clear.

Saatvik Jain — President

So, typically for the electricity if a generic one, there are many companies who are into — into that and it’s in the Supreme Court. Okay, so we did not want to, find a way into paying the taxes are not falling out from challenging. Because we feel that it’s — it’s an industry-specific classification issue on the [Technical Issues] that that is also where we think that we have a strong place. So, we really are waiting now and today I mean, the scenario is as I told that we have war chest of cash, we really don’t see any need to go upfront approach the government and will wait for the law to take its own.

Saket Kapoor — Kapoor and Company — Analyst

Thank you sir, thank you for the elaborate call and we hope for the continuity of the same and all the best to the team sir.

Saatvik Jain — President

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you sir.

Saatvik Jain — President

Thank you everybody for spending time with us this evening, hearing about us and the results. I hope you’ve been able to clarify all the questions that you had. If anything further, you can get-in touch through our IR firm. And hope to — looking-forward to interacting with you again soon. Thank you.

Operator

[Operator Closing Remarks]